Case Note & Summary
The dispute arose from a contract dated 21 March 1986 between East India Construction Company and Union of India through the Chief Engineer (Construction), Central Railway, for earth work in formation and construction of minor bridges for NhavaSheva Port Trust. The contractor invoked arbitration, and a three-member Arbitral Tribunal passed an award on 7 August 2009, partly allowing and partly rejecting various claims and counter claims. The petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The petitioner specifically contested the rejection of Claim Nos. 1, 2, 4, 4A, and 5, as well as the allowance of Counter Claim Nos. 1 and 9. Claim No. 1 was awarded in part, but the petitioner did not press further challenge. Claim No. 2 had been directed for joint checking, but no joint checking had occurred, and the respondent expressed willingness to finalize it. Claim Nos. 4, 4A and 5 concerned dewatering, removal of slushy soil, and construction of coffer dam, which the tribunal rejected by relying on Note 2 of the Non-Schedule Items, without adequately addressing the changed drawings and circumstances. The court found that the tribunal failed to explain how the note applied, thus rendering the rejection unreasoned. Regarding Counter Claim No. 1, the tribunal relied on a CVC report that was never supplied to the petitioner despite a request, violating natural justice. Counter Claim No. 9 was directed for reconciliation but never adjudicated. The High Court held that an arbitral award must be supported by reasons, especially when rejecting claims based on contractual clauses that may have been superseded by changed conditions. The failure to provide reasons and reliance on an undisclosed document constituted grounds to set aside the award. The court further observed that several claims and counter claims were interconnected, and justice required a fresh consideration of all issues. Consequently, the court quashed the entire award and remanded the matter to the Arbitral Tribunal for de novo consideration, with liberty to the General Manager, Central Railway, to fill any vacancy in the tribunal. All points were kept open, and no costs were ordered.
Headnote
A) Arbitration Law - Setting Aside of Award - Lack of Reasons - Arbitration and Conciliation Act, 1996 - The arbitral tribunal rejected Claim Nos. 4 and 4A for dewatering and removal of slushy soil based solely on Contractual Note No.2 without examining whether the note applied to the changed circumstances and without addressing the claimant's justification. Held that the award was liable to be set aside for want of reasons (Paras 6-7). B) Arbitration Law - Natural Justice - Reliance on Undisclosed Document - Arbitration and Conciliation Act, 1996 - The tribunal relied on a CVC report that was not supplied to the petitioner despite the petitioner's request. The court held that relying on an undisclosed document without giving opportunity to the petitioner to contest it violated principles of natural justice, rendering that portion of the award unsustainable (Para 9). C) Arbitration Law - Remand of Award - Power of Court - Arbitration and Conciliation Act, 1996 - Where the arbitral award suffered from lack of reasons and denial of natural justice on multiple interconnected claims, the High Court quashed the entire award and remanded the matter to the Tribunal for reconsideration of all issues, keeping all points open, with liberty to appoint new arbitrators if necessary (Paras 12-13).
Issue of Consideration
Whether the arbitral award dated 7 August 2009 should be set aside on grounds of inadequate reasoning, procedural unfairness, and failure to consider evidence
Final Decision
The Award dated 7 August 2009 is quashed and set aside. The matter is remanded back for reconsideration on all issues. All points are kept open. The Arbitral Tribunal to pass award/order in accordance with material available and the law, as expeditiously as possible. In case all members are not available, liberty granted to the General Manager, Central Railway, to fill the vacancy. No costs.
Law Points
- Legal points not extracted
- Contractual terms bind parties
- Changed circumstances allow contractor to claim compensation subject to proof
- Arbitrator must give reasons for applying contractual notes to facts
- Reliance on unsupplied document violates natural justice
- Award can be set aside for lack of reasons
